No casualties have been reported, but 47 residents of Guryong Village were evacuated, an official at the Seoul Metropolitan Fire & Disaster Headquarters said.
About 110 people were living in the affected area, Yonhap News reported, citing fire officials.
The blaze broke out about 5.10am on Friday and authorities later raised the fire alert to the second-highest level, with firefighters concerned it might spread to a nearby mountain, the fire official said.
Photographs from the scene showed a towering column of black smoke hanging over the area, as elderly residents wearing face masks evacuated.
"I was asleep until a neighbour called saying there was a fire. I ran out and saw the flames already spreading," said Kim Ok-im, 69, who said she had lived in the area for nearly 30 years.
"A few years ago, a flood swept everything away, and now it feels like fire will take the rest," she said, adding that she was worried about where she could live if her home was destroyed.
Eighty five fire trucks were sent to the scene, but officials could not send a helicopter due to haze and fine dust shrouding the city, she said.
South Korean Safety Minister Yun Ho-jung ordered officials to "mobilise all available personnel and equipment to focus fully on rescuing lives and extinguishing the fire," the Yonhap News Agency cited him as saying.
Guryong Village is a pocket of ramshackle housing in Gangnam, one of Seoul's wealthiest districts. It is due to be redeveloped into high-rise residential buildings.
Often described as Seoul's largest remaining shantytown, Guryong emerged when families displaced by public works projects in the 1970s and 1980s — including construction for the Asian Games and the Seoul Olympics — settled on the edge of Gangnam without permits, according to a Seoul city planning report.
The makeshift homes are often densely packed together and built with highly flammable materials like vinyl sheets, plywood, and Styrofoam, making the area particularly vulnerable to fires, according to an assessment by the fire department after a blaze in 2023.
Most residents have moved out of Guryong for the redevelopment, but about 336 households remain, according to the Gangnam District city planning department.
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